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Construction estimating and contracts glossary

Plain definitions of the words used to price, tender, contract, claim and deliver building work in Victoria.

This construction glossary explains the terms that builders, subcontractors, developers, homeowners and owners corporation committees in Victoria meet when a project is estimated, tendered, contracted, claimed and delivered. Each definition is short and plain, with a link to a fuller page where one exists.

The definitions describe general Australian practice and are general information only. Your contract and the current legislation decide how a term applies to your project, so check those documents, and get legal advice on legal questions, before relying on a definition.

Addendum: A formal change to the tender documents issued while a tender is still open, such as revised drawings, answers to questions or a new closing date. Addenda form part of the tender package, so each one should be checked and priced before the tender goes in. EstimateOne tendering support
Adjudication: A fast, independent process under security of payment law for deciding a disputed payment claim. An adjudicator decides how much is payable within short timeframes, and the parties can still pursue their full contractual rights afterwards. Progress claims and variations
ANZSMM: Short for the Australian and New Zealand Standard Method of Measurement, the measurement standard sold by the Australian Institute of Quantity Surveyors (AIQS). It sets rules for how building work is measured and described, so everyone pricing a bill of quantities reads each item the same way. Estimating guide

Back charge: An amount a head contractor deducts from a subcontractor's payment to recover the cost of work, cleaning or repairs it carried out on the subcontractor's behalf. The subcontract sets out when a back charge can be made and what notice must be given. Contract administration
Base stage: The first construction stage paid under a Victorian domestic building contract, reached when the foundation work is complete. For a home on a concrete slab this is generally when the slab is finished, and the contract sets out exactly what the stage includes. Progress payment stages
Bill of quantities (BoQ): A document listing each measured item of work in a project, with a description, a unit and a quantity, such as cubic metres of concrete or square metres of wall lining. It can be issued unpriced so that every tenderer prices the same quantities, or priced with rates to show an expected cost. Bill of quantities explained
Building surveyor: A registered practitioner who checks that building work meets the building regulations. In Victoria the building surveyor issues the building permit, carries out the mandatory inspections and issues the occupancy permit or certificate of final inspection, and can work for the local council or in private practice.

Clarification: A question raised to settle something unclear in the tender or contract documents, or the written answer to it. During a tender the answer is often issued to every tenderer, so all prices rest on the same information. Reading tender documents
Client-side project manager: A project manager engaged by the owner to look after the owner's interests through design, tender, construction and handover. They check the builder's program, claims, variations and quality, and report to the owner. Client-side project management
Construction management: A delivery method where the owner pays a construction manager a fee to plan the job, procure the trades and run the site, and usually holds each trade contract directly. The owner sees every trade price and carries more of the cost and coordination risk. Contract types
Contingency: An amount set aside in a budget or estimate for costs that are likely to arise but cannot yet be identified, such as unexpected ground conditions or design changes. It is usually shown as its own line so everyone can see how much is held for risk.
Contract administration: The day-to-day running of a construction contract after it is signed, covering procurement, progress claims, variations, notices, correspondence and records. It keeps both parties working to the contract's terms and deadlines. Contract administration services
Cost plan: A budget for a project broken down by building element or trade, prepared during design and updated as the design develops. It lets the owner check that the design stays within budget before tenders are called. Stages of an estimate
Cost plus: A contract where the owner pays the actual cost of labour, materials, plant and subcontracts, plus an agreed fee or percentage for the builder's overheads and profit. The owner carries the cost risk, so open books and regular cost reporting matter. Contract types
Critical path: The chain of dependent activities in a construction program that determines when the project can finish. Any delay to an activity on the critical path delays completion unless the time is made up elsewhere. Managing construction delays

Defect: Work that does not match the contract, drawings or specification, or does not meet the required building standards. Defects found before completion are usually listed and fixed before handover, and those that appear later are dealt with during the defects liability period. Defects liability period
Defects liability period (DLP): A set period after completion during which the builder or contractor must return to fix defects that appear in their work. The contract states how long it runs, and the release of the last of the retention or security is often tied to its end. Defects liability period
Design and construct (D&C): A contract where one contractor completes the design from the owner's brief and then builds it. The owner gains a single point of responsibility and gives up some control over design detail. Contract types
Development manager: A consultant who runs a property development on the owner's behalf, from site acquisition and feasibility through design, approvals, construction and defects. The role coordinates the consultants, builder and finance so the project keeps to its program and budget. Development management
Domestic building contract: A contract for residential building work, such as a new home, an extension or a renovation. In Victoria these contracts are covered by consumer protection law that sets rules on deposits, progress payments and what the contract must contain. Domestic contracts in Victoria
Drawings: The architectural, structural and services plans that show what is to be built, including layouts, elevations, sections and details. Drawings are read together with the specification, and the contract usually says which document takes priority where they conflict.

Estimate: A calculated forecast of what a piece of work will cost, built from measured quantities, rates and allowances. It informs a budget or a tender, and it becomes an offer once it is issued as a quote or tender price. Estimating guide
EstimateOne (E1): An Australian online tendering platform where builders list projects with their tender documents and invite subcontractors and suppliers to quote. Subcontractors use it to find work, download drawings and scopes, and track the tenders they price. EstimateOne tendering support
Estimator: A person who measures the work from the drawings, applies rates and prepares the price for a tender or budget. Estimators work in-house for builders and subcontractors or as outside consultants. Quantity surveyor vs estimator
Exclusion: An item a tenderer states it has left out of its price, such as authority fees, rock excavation or making good after other trades. Exclusions move the cost and risk of that item back to the client, so they should be written specifically and read before quotes are compared. Pricing and exclusions
Extension of time (EOT): A change to the date for completion granted under the contract when the work is delayed by a cause the contract allows for, such as a variation or a delay caused by the owner. Contracts usually require written notice within a set time, so delays should be recorded and notified as they happen. Managing construction delays

Feasibility study: An early assessment of whether a proposed development is worth pursuing, comparing the expected costs of land, construction, fees and finance with the expected sale value or rent. It also tests planning controls, site constraints and risks before money is committed to design. Development management
Final claim: The last payment claim under a contract, setting out everything the contractor says is still owed once the work, and usually the defects liability period, is complete. The contract sets out when it must be made, and Victoria's security of payment Act also has rules for final claims, so check both before the date arrives. Progress claims and variations
Fixing stage: A progress payment stage in a Victorian domestic building contract, reached when the internal linings, architraves, skirting boards, doors, built-in fittings, baths and basins are fixed in place. Progress payment stages
Frame stage: A progress payment stage in a Victorian domestic building contract, reached when the frame of the home is complete and has been approved by a building surveyor. Progress payment stages

Handover: The point at which the completed work passes from the builder to the owner, usually with the keys, manuals, warranties, certificates and the occupancy permit. Project management
Head contractor: The builder engaged directly by the owner or principal to deliver the whole project. The head contractor engages and coordinates the subcontractors and answers to the owner for their work. Estimating for builders

Latent condition: A physical condition on or near the site that could not reasonably have been found before the contract was signed, such as buried rock, old footings or contaminated soil. The contract sets out how a latent condition must be notified and who bears its cost and delay.
Liquidated damages: An amount per day or per week, set in the contract, that the contractor pays the owner if the work is not finished by the date for completion. The rate is agreed in advance as an estimate of the owner's loss from late completion. Managing construction delays
Lock-up stage: A progress payment stage in a Victorian domestic building contract, reached when the external wall cladding and roof covering are fixed and the flooring is laid. Progress payment stages
Lump sum: A contract where the builder agrees to complete a defined scope of work for a fixed price, adjusted only for variations and other events the contract allows for. The builder carries the risk of its own estimate, and the owner carries the risk of anything the drawings leave out. Contract types

Margin: The amount added to the cost of the work to cover the business's overheads and profit. Estimators usually keep margin as a separate line so it is clear what is available to negotiate. Rates and margin
Mark-up: The record on the drawings of what was measured in a take-off, with each item coloured or annotated so its quantity can be traced and checked. The word is also used for an amount added to cost to cover overheads and profit. Take-off and mark-up

Occupancy permit: A permit issued by the building surveyor in Victoria confirming that a building is suitable to occupy, needed before anyone moves into or uses a new building. Some works, such as many alterations, receive a certificate of final inspection instead.
Owner's representative: A person or firm appointed to act for the owner on a project, giving instructions, receiving the builder's correspondence and checking work and claims. In practice the term is often used for a client-side project manager. Project management services
Owners corporation: The body made up of all the lot owners in a subdivision with common property, such as an apartment building or unit complex, responsible for managing and maintaining that common property. It decides on building works through its committee or a resolution of the owners, depending on the scope. For owners corporations

Payment claim: A claim for payment for work done or materials supplied, served on the party that owes it. Under Victoria's security of payment Act, a payment claim starts the timeframe in which the other party must respond with a payment schedule or pay. Progress claims and variations
Payment schedule: The written response to a payment claim, stating how much the paying party will pay and the reasons for paying less than the amount claimed. Under Victoria's security of payment Act a payment schedule has to be given within a set time, and missing it can leave the paying party liable for the full amount claimed. Progress claims and variations
Performance security: Security a contractor gives the owner or head contractor that can be called on if the contractor does not meet its obligations, such as cash retention, a bank guarantee or an insurance bond. The contract sets the amount, when it can be used and when it is returned.
Practical completion: The stage, as defined in the contract, when the work is complete apart from minor defects or omissions that do not stop the building being used for its purpose. It usually starts the defects liability period, stops liquidated damages and often triggers the release of part of the retention. Completion and defects
Preliminaries: The site-wide costs of running a project that do not belong to any single item of work, such as site establishment, supervision, temporary services, scaffolding, insurances and waste removal. They are priced as their own section of an estimate or spread through the rates. What a bill contains
Prime cost item (PC item): An allowance in the contract price for an item that has not yet been selected, such as tapware, appliances or tiles. Once the item is chosen, the price is adjusted up or down to the actual cost, often with an agreed margin on any increase. Reading an estimate
Principal: The party that engages the contractor under a construction contract, usually the owner or developer. Standard form contracts use this term for the client. Contracts guide
Procurement: Buying the materials, trades and services a project needs, from inviting and comparing quotes to placing orders and subcontracts. Each order should match the scope, the program and the budget. Contract administration
Program (programme): The construction schedule showing each activity, its duration, the order of work and the key dates. Australian construction usually spells it program, and the spelling programme also appears in some contracts and specifications. Program planning
Progress claim: A request for payment for the work completed up to a set date, usually made monthly or at agreed stages. It shows the contract sum, the value of work done, variations, retention and the amounts previously paid. Progress claims and variations
Provisional sum: An amount included in a price for work that cannot yet be measured or priced accurately, such as landscaping before it is designed or rock removal. It is adjusted to the actual cost once the work is defined or carried out. Reading an estimate

Qualification: A statement in a tender or quote setting out the assumptions or conditions the price is based on, such as the drawing revisions used or the working hours allowed. Qualifications show the client exactly what has been priced, and they can change how two prices compare. Pricing a tender
Quantity surveyor: A cost professional who measures building work, prepares bills of quantities and cost plans, and advises on construction costs, claims and variations. The Australian Institute of Quantity Surveyors (AIQS) is the professional body for quantity surveyors in Australia. Quantity surveyor vs estimator
Quote: A price offered for a defined scope of work that the other party can accept. A quote should state what it includes and excludes, the documents it is based on and how long the price holds. Estimating guide

Rate: The cost of supplying and installing one unit of an item, such as one square metre of tiling. It is built up from materials, labour and plant or taken from a subcontractor's quote, and the rate multiplied by the quantity gives the amount for that line. How rates work
Request for tender (RFT): The invitation and package of documents a client or builder issues to ask for tenders. It usually includes the drawings, specification, scope of works, contract conditions, closing date and submission requirements. How tenders are invited
Retention: Money held back from each progress payment as security that the contractor will complete the work and fix defects. The contract states how much is held and when it is released, often part at practical completion and the rest after the defects liability period. Retention explained
RFI (request for information): A written question asking the designer, builder or client to clarify something in the documents, such as a missing dimension or a conflict between drawings. The reply should be kept with the tender or project records, because it can affect price and scope. Reading tender documents

Scope gap: Work that is needed to complete the project but is not clearly included in any trade's scope or price, often at the interfaces between trades. Scope gaps show up when the drawings, specification and scope of works are read against each other. Scope review
Scope of works: A document describing the work a contractor or trade is to carry out under a contract or trade package. It is read together with the drawings and specification, and work outside it is usually priced as a variation. Scope and contract review
Security of payment: Laws in each Australian state and territory that give people who carry out construction work or supply materials a statutory right to progress payments and a fast process for resolving disputed claims. In Victoria this is the Building and Construction Industry Security of Payment Act 2002. Progress claims and variations
Site instruction: A written direction about the work given on site by the superintendent, project manager or builder. If it changes the scope, the instruction becomes the record behind a variation, so it should be dated and kept. Progress claims and variations
Specification: A written document that sets the materials, products, standards and workmanship required for the work. It is read with the drawings and often settles questions the drawings leave open.
Subcontractor: A business engaged by the head contractor to carry out part of a project, such as plumbing, electrical or plastering. The subcontractor's contract is with the head contractor, so its scope, claims and variations run through the builder. For subcontractors
Superintendent: The person named in many standard form contracts to administer the contract for the principal, assessing claims, variations, extensions of time and completion. The role is set by the contract and may be filled by an architect, engineer or project manager. Superintendent and project manager roles

Take-off: The measuring stage of an estimate, where quantities are taken from the drawings and recorded in the units the work is bought and built in, such as cubic metres of concrete or linear metres of pipe. Take-off and mark-up
Tender: A formal priced offer to carry out defined work, submitted by a set closing date in response to an invitation. The word also describes the whole process of inviting, pricing and assessing those offers. Tendering guide
Tender levelling: The step where a builder or client adjusts competing quotes to the same basis, adding back the cost of anything excluded and noting each qualification, before comparing them. A low quote with a long list of exclusions can end up higher once levelled. Pricing and exclusions
Tender register: A record of every tender invitation received, the decision to price or pass, the price lodged and the result. It shows which builders, trades and project types a business wins and where follow-up is due. Keeping a tender register
Trade package: The part of a project offered to one trade for pricing, such as concreting, framing or electrical, together with the drawings, specification, scope of works and contract conditions that apply to it. Estimating for builders

Variation: A change to the work described in the contract, such as added work, omitted work or a change in materials, usually priced and approved in writing before it is carried out. The agreed amount is then added to or deducted from the contract sum. Progress claims and variations
Variation order: The written instruction or approval that authorises a variation and records its scope, price and any time effect. Many contracts require one before varied work can be claimed. Progress claims and variations

Related Construction guides Estimating services Contract administration Progress claims and variations

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